The Bailout Fallout

The day for the vote on the bailout has come and passed. The vote went to a slight majority against the bill and the bailout was not carried out. Weather or not this is a positive thing is yet to be seen. The sudden shock of the bailout being turned down kicked up some very high ripples and the effects of it may yet be seen far into the future. The bailout was not as much a boost to the economy as much as a boost of hope to many investors that the large down trend may be reversed. This hope was nurtured by promises of a renewed economy causing many investors to.. invest. This slight balance and leveling and even small uptrend was a relief for a scared public, distraught by their portfolios. With the no vote on this bill, the people realized that there would be no uptrend and began to sell.. extremely quickly. Within 6 minutes of the failed bill the Dow index dropped over 260 points, and continued to drop to over 750 points in a single day. The largest ever single day market value drop in the history of the United States. All 3 major indexes lost over 7% of their total value totaling up to over $1.1 trillion in loss across the boards. The impact of this no vote also triggered rather quickly a reconsideration of the bill, a similar one of which is currently in debate. This reconsideration, and the record low levels of the stocks after yesterday has sparked another large reaction in the opposite direction. With hope renewed and record low prices, investors made today a record day as well gaining over 60% of the loss back with an increase of almost 500 points, the third biggest gain in US history. This huge bump will hopefully cause more people to look at this and maybe get more focus on this by the government, allowing them time to make a decision rather than jumping on, or off, the bandwagon. The next quick decision might not make such a rapid recovery. 

The Proposed Bailout

Recently in the news talks have begun to come up about an extremely large government payout to help boost the US stock exchange. The check valued at over $700 billion dollars would allow the government to buy up failing companies that are essential to keep US markets afloat. The idea behind this is to raise the value of these companies, boost their stock price, and artificially raise the overall stock market hoping that the raise in big name stocks will get people to start buying again. The people proposing this idea are Treasury Secretary Paulson and long time Federal Reserve Chairman Bernanke. Both of these men are very intelligent and well versed in economics but their plan, if it fails, could not only drag the stock market down further, but could completely destroy the value of the dollar. The stocks they are proposing investing in are known by analysts as "toxic waste" stocks meaning that if invested in, they have absolutely no way to honor their contracts and pay that money back. The last time we allowed these two people to act without keeping them in check they were only given $29 billion to help keep JP Morgan afloat and succeeded in destroying Fannie Mae and Freddie Mac, which are the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation respectively. They also destroyed AIG, the American International Group which at the time was the biggest insurance company in the US. Although their plan may save us, with the amount of money we are lending them this time, the result could be much worse.

The Presidential Debate

The debate between the presidential nominees is scheduled for tonight. There was worry that McCain, who claimed to be putting his campaign on hold would not show up but he announced today that he would be there. With just over a month until the presidential election, this debate is a very important one for both candidates. A large focus of the debate will probably be the state of the economy and the very recent, very large, stock market bailout that is in under discussion in Washington. This is a very important meeting not only because of the time, but because of the level playing field. Most of what has been seen of the candidates so far has been in the conventions or in ads specifically designed to promote the candidate. Another big topic of the debates might be that of national security and foreign policy both of which are strong differences and talking points between the candidates and parties. It is predicted that this will be one of, if not the most watched debate ever with how close the race is. This is the first of three major debates between the candidates and winning these debates may just get the respective candidate the win.